In frank terms, they admitted that they
"over-trust" their operating managers.

They are slow to remove inadequate managers, and they don't
exercise strict control over the operations or finances
of subsidiaries. Below are my notes on
Carol's question, along with responses from Warren and
Charlie.

Carol Loomis: In an interview in April, you said "I hope
we'll get questions that'll probe at our weak points." My
question is what are your weak points, and what can you do to
address them?

Warren: That would spoil all the fun for the journalists! We
point them out, though. I would say if we executed a sweep
account for all our subsidiaries some years ago we'd have a few
more dollars now. Who knows what they're doing with some of those
balances. We are very disciplined in some ways, and sloppy in
other ways. A clear weak point, I am slow to make personnel
changes. I like our managers. Charlie and I had a friend,
couldn't be a greater guy, we were slow to make a change there.
how long would you say we went there, Charlie?

Charlie: I don't know, exactly. But returning to the sweep
account, reminds me of a friend I knew when I was in the Air
Corps. A nurse took blood from a friend of mine, and all of the
sudden, the blood stopped flowing. She screamed, and then, all of
the sudden, she fainted. Some companies swept every day, but it
created a tone that is definitely less desirable than ours.

We've waited too long on retirement for some of our managers. We
will be slow [to make personnel changes]. There will be times
where our lack of supervision, we'll miss something. We think
that giving our managers the degree of freedom they enjoy and
will also accomplish a lot. Someone will come along some days and
say "more checks and oversight."

Something will happen that wouldn't have happened, and they'll be
right. But they can't measure all the good things that freedom
will accomplish. We don't have HR department or in-house legal
counsel, which would be unthinkable to others, but on balance
it's a benefit. When the downside shows up people will say "well,
you should have..." And they'll be right in that individual case
only.

Charlie: By the standards of the rest of the world, we
over-trust. And so far, our results have been far better, because
we carefully selected people who should be over-trusted. I think
a lot of organizations work better when there is a culture of
trust. And in modern organizations, where there are tight
controls and monitoring, I think they're going to be worse for
it.

Of course, as both Warren and Charlie pointed out, this weakness
is also a strength.

They provide operating managers with a lot of autonomy -- they
"over-trust." Of course, this can go visibly wrong -- for
instance, a manager could abuse their trust, retain more earnings
than necessary, make bad investments, etc... But, it has a lot of
unseen benefits.

Operating managers that are empowered (and trusted) are more
likely to be effective and motivated, and it allows Berkshire to
run very lean with a limited corporate staff at headquarters on
Farnam Street in Omaha.